Managing With Style: The Effect of Managers on Firm Policies
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4280-02.pdf
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Author(s)
Bertrand, Marianne
Schoar, Antoinette
Date Issued
February 10, 2003
Series/Report no.
MIT Sloan School of Management Working Paper;4280-02
Abstract
This paper investigates whether and how individual managers affect corporate
behavior and performance. We construct a manager-firm matched panel data set
which enables us to track the top managers across different firms over time. We find
that manager fixed effects matter for a wide range of corporate decisions. A significant
extent of the heterogeneity in investment, financial and organizational practices of firms
can be explained by the presence of manager fixed effects. We identify specific
patterns in managerial decision making that appear to indicate general differences in
"style" across managers. Moreover, we show that management style is significantly
related to manager fixed effects in performance and that managers with higher
performance fixed effects receive higher compensation and are more likely to be found
in better governed firms. In a final step, we tie back these findings to observable
managerial characteristics. We find that executives from earlier birth cohorts appear on
average to be more conservative; on the other hand, managers who hold an MBA
degree seem to follow on average more aggressive strategies.
Subjects
Manager Fixed Effects
Management Style
Persistent DSpace Link
